Wednesday, January 16, 2008

Warning Bells

Today stocks in China fell sharply after Citigroup released a report that it suffered US$9.8 billion in losses in the fourth quarter due to the sub-prime mortgage crisis.

The Shanghai Composite Index fell 2.81 per cent to close at 5,290.60, and the Shenzhen Composite Index 2.42 per cent to end at 1,538.35.

Citigroup's news caused major US indices to drop as well; the Dow Jones Industrial Average declined 2.17 per cent, Standard & Poor's 500 index fell by 2.49 per cent, and Nasdaq Composite Index dropped by 2.45 per cent.

Europe and Japan followed suit. Hong Kong fared the worst, plunging by 1,386.93 points to finish at 24,450.85, a drop of 5.4 per cent.

With the sub-prime mortgage crisis and low December retail sales in the United States, people may have to start using the R-word soon.

And while China is on the whole mostly isolated from the rest of the world markets, it is holding over US$1.5 trillion in reserves.

Also its eager rookie investors may begin to realize that playing the stock market really is a gamble.

Today's newspaper had a story about how 70 per cent of China's 136 million investors are low and middle income earners.

In a survey conducted last month by Beijing-based Securities Association, almost 10 per cent of new investors who entered the market last year never considered possible financial losses.

They might be sweating bullets now.

There is a big concern among stock analysts and financial experts that Chinese investors are not knowledgeable enough about the stock market and just think it's a way to get rich quick.

Seventy per cent of these people make less than 5,000RMB (US$690) a month.

And if they're putting a lot of their hard-earned cash into a market that may have ended its bullish streak, there might be more financial woes to come.

1 comment:

ks said...

what goes up must come down. that is the basic rule. how can the market go up all the time. pity the' blind current' who will lose their shirt.